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E-Cig Ban Shows It's Really a War on Tobacco Companies

Opponents still aren't satisfied that "vaping" is a safer alternative to smoking.

Regardless of what you think about the regulations and restrictions imposed on cigarettes and smokers, the health risks behind the rationale for taking action is at least defensible. Not so the ban on electronic cigarettes that's expected to be signed by New York City's outgoing mayor, Michael Bloomberg. It reveals the war being waged isn't on "smoking" per se, but rather on the tobacco companies behind them.

Source: SXC.hu

According to the American Lung Association, smoking contributes to 80% of lung-cancer deaths in women and to 90% in men. Those are certainly compelling statistics that would motivate do-gooders to try and minimize the incidence of smoking, whether through regulation, restriction, public advocacy, and so on.

E-cigs, however, have the potential to dramatically alter the landscape without ham-handed policies. Because the tobacco-free product has 450 times lower levels of toxicants in its vapors than can be found in cigarette smoke, it is proving more popular than the leading smoking cessation product Nicorette, which is manufactured by GlaxoSmithKline(NYSE:GSK). Despite the health risks, some people actually enjoy smoking; e-cigs give them that same sort of pleasure without most of the attendant dangers. Smoking cessation products, on the other hand, involve a rather unpleasant transition phase that some smokers would rather not endure.

Yet because tobacco companies are also the biggest manufacturers of electronic cigarettes, they're still profiting handsomely and that seems to rub some people the wrong way.

Lorillard(NYSE:LO) is the leading e-cig manufacturer with its blu eCig brand, which although still a niche market product that represents about 1% of the $89 billion total tobacco industry, the cigarette maker owns a dominant 44% share of it. It's an industry still in its infancy, but the returns are already noticeable. Lorillard, which acquired blu eCigs last year for $135 million, saw operating income grow from about $1 million in 2012 to some $9 million this year, and with its recent acquisition of the U.K.-based SkyCig brand, it provides a platform for further expansion.

Other tobacco giants, though late to the game, are forging full-speed ahead with both Altria(NYSE:MO) and Phillip Morris International(NYSE:PM) unveiling plans for new e-cig products this year and announcing just last week a series of agreements to commercialize e-cig opportunities.

But regulators are already falling over themselves to halt their advance. In Europe, e-cig maker Totally Wicked got hold of proposed regulations that, if implemented, would essentially bring the industry to its knees as they all but ban or restrict the sale of refill liquids, refillable atomizers, and nicotine levels. New York City, however, chose not to take the backdoor route but rather come right out and ban them altogether. Not for health reasons, mind you, but because it could "renormalize" smoking.

Smoking activists have invested time, effort, and money in vilifying smoking and ostracizing smokers such that permitting e-cigs in public areas like restaurants, bars, and parks would undermine the negative public perception they've worked so hard to create.

Although they're healthier for the smoker and haven't been found to cause any harm to those around them since they don't produce toxic and carcinogenic byproducts like that found in secondhand smoke, they'll essentially still be segregated for use only in the home. As one of the New York City council member ban sponsors says, the e-cig makers "wanted to be treated like tobacco products, they won. I'm more than happy to oblige them today."

But those who argue the restrictions, regulations, and taxes imposed on tobacco companies are for the good of the smoker are being disingenuous. They're not so much for the benefit of smokers as they are designed to hurt the tobacco companies -- if not, why oppose a better alternative? It's not likely this move will stub out the advance of electronic cigarettes, but enough initiatives spawned by New York City's Bloomberg have found traction elsewhere around the country that we're likely to see this repeated, and that's not a defensible position to take.

Author

Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.

Having made the streets safe for Truth, Justice and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio. So follow me on Facebook and Twitter for the most important industry news in retail and consumer products and other great stories.